Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarter ended Commission file number
June 30, 1996 0-14501
MUTUAL BENEFIT MORTGAGE INVESTORS 1985
(Exact name of registrant as
specified in its governing instrument)
Rhode Island 05-0413538
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 Broad Street
Newark, New Jersey 07102
(Address of principal executive) (Zip Code)
Registrant's telephone number, including area code: (201) 481-7813
Indicate by a checkmark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
MUTUAL BENEFIT MORTGAGE INVESTORS 1985
(A Limited Partnership)
Balance Sheets (Unaudited)
June 30, December 31,
ASSETS 1996 1995
----------- ------------
Cash and cash equivalents $ 100,184 $ 126,122
Due from affiliates - -
Mortgage loan participation 1,429,257 1,439,855
----------- ------------
Total Assets $1,529,441 $ 1,565,977
----------- ------------
----------- ------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES
Accrued expenses $ 8,465 $ 9,572
Due to General Partners 6,115 5,550
----------- ------------
Total Liabilities 14,580 15,122
----------- ------------
PARTNERS' CAPITAL
General Partners:
Contributed capital 10 10
Accumulated earnings,
net of distributions (144,755) (144,882)
----------- ------------
(144,745) (144,872)
----------- ------------
Limited Partners:
Contributed capital,
50,000 units
authorized, 23,076 units
issued and outstanding 5,181,385 5,181,385
Less syndication costs (1,269,780) (1,269,780)
----------- ------------
3,911,605 3,911,605
Accumulated earnings, net of distributions (2,251,999) (2,215,878)
----------- ------------
1,659,606 1,695,727
----------- ------------
Total Partners' Capital 1,514,861 1,550,855
----------- ------------
Total Liabilities and
Partners' Capital $1,529,441 $ 1,565,977
----------- ------------
----------- ------------
<TABLE>
MUTUAL BENEFIT MORTGAGE INVESTORS 1985
(A Limited Partnership)
Statements of Income (Unaudited)
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Interest
Mortgages $52,991 $ 53,522 $106,114 $106,199
Investments 899 1,237 1,997 2,423
Other income - - 2,291 -
------- -------- -------- --------
Total revenues 53,890 54,759 110,402 108,622
------- -------- -------- --------
Expenses
Mortgage servicing fees 1,394 1,409 2,792 2,817
Other 6,633 15,338 12,456 19,717
------- -------- -------- --------
Total expenses 8,027 16,747 15,248 22,534
------- -------- -------- --------
Net Income $45,863 $ 38,012 $ 95,154 $ 86,088
------- -------- -------- --------
------- -------- -------- --------
Allocation of Net Income:
General Partners $ 459 $ 380 $ 952 $ 861
Limited Partners 45,404 37,632 94,202 85,227
------- -------- -------- --------
$45,863 $ 38,012 $ 95,154 $ 86,088
------- -------- -------- --------
------- -------- -------- --------
Net Income Per Limited
Partnership Unit-
- Note B $ 1.97 $ 1.63 $ 4.08 $ 3.69
------- -------- -------- --------
------- -------- -------- --------
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<TABLE>
MUTUAL BENEFIT MORTGAGE INVESTORS 1985
(A Limited Partnership)
Statements of Changes in Partners' Capital (Unaudited)
<CAPTION>
General Limited
Partners Partners Total
<S> <C> <C> <C>
Balance at January 1, 1995 $ (144,401) $ 1,714,406 $ 1,570,005
Net income 481 47,595 48,076
Distributions (912) (62,364) (63,276)
----------- ------------ ------------
Balance at March 31, 1995 (144,832) 1,699,637 1,554,805
Net income 380 37,632 38,012
Distributions (481) (47,596) (48,077)
----------- ------------ ------------
Balance at June 30, 1995 (144,933) 1,689,673 1,544,740
Net income 917 90,772 91,689
Distributions (856) (84,718) (85,574)
----------- ------------ ------------
Balance at December 31, 1995 (144,872) 1,695,727 1,550,855
Net income 493 48,798 49,291
Distributions (510) (90,754) (91,264)
----------- ------------ ------------
Balance at March 31, 1996 (144,889) 1,653,771 1,508,882
Net income 459 45,404 45,863
Distributions (315) (39,569) (39,884)
----------- ------------ ------------
Balance at June 30, 1996 $ (144,745) $ 1,659,606 $ 1,514,861
----------- ------------ ------------
----------- ------------ ------------
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MUTUAL BENEFIT MORTGAGE INVESTORS 1985
(A Limited Partnership)
Statements of Cash Flows (Unaudited)
<CAPTION>
For the six months ended
June 30,
1996 1995
--------- ----------
<S> <C> <C>
Operating activities:
Net income $ 95,154 $ 86,088
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in operating assets and liabilities:
Decrease in due from affiliates - 4,193
Decrease in accrued expenses (1,107) (6,502)
Increase in due to general partner 565 1,300
--------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 94,612 85,079
--------- ----------
Investing activities:
Mortgage principal payments received 10,598 8,385
--------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 10,598 8,385
--------- -----------
Financing activities:
Distributions to partners (131,148) (111,353)
--------- ----------
NET CASH USED IN FINANCING ACTIVITIES (131,148) (111,353)
--------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (25,938) (17,889)
Cash and cash equivalents at
beginning of period 126,122 137,843
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $100,184 $ 119,954
--------- ----------
--------- ----------
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MUTUAL BENEFIT MORTGAGE INVESTORS 1985
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION: Mutual Benefit Mortgage Investors 1985 , a Rhode Island
limited partnership (the "Partnership"), was formed to purchase
participations in first-mortgage loans on residential and commercial
properties principally from The Mutual Benefit Life Insurance Company,
predecessor to Mutual Benefit Life Insurance Company in Liquidation
("Mutual Benefit") a New Jersey corporation. The term of the Partnership
will expire in December 2005, unless sooner terminated, as provided in the
Partnership Agreement.
Profits, losses and distributable cash flow, as defined, generated from the
Radnor Loan (see Note 2) are allocated 99% to the Limited Partners and 1%
to the General Partner. In no instance shall the General Partner be
allocated less than 1% of each item of income, gain, loss, deduction or
credit each year. Distributions from capital transactions shall be
distributed 100% to the Limited Partners until the Limited Partners have
received a return of their original capital plus a 20% cumulative return
and thereafter, 85% to the Limited Partners as a class and 15% to the
General Partner.
BASIS OF PRESENTATION: The Partnership's financial statements are
presented on the basis of a going concern and do not include any
adjustments relating to the possible future effects on the recoverability
of assets or the amount of liabilities that may result from the possible
inability of the Partnership as a going concern. The following factors
raise substantial doubt about the Partnership's ability to continue as a
going concern.
Prior to May 1, 1994, the Partnership's General Partner, MB Mortgage, Inc.
("MBM"), was an indirect wholly owned subsidiary of Mutual Benefit. On
July 16, 1991, the Superior Court of New Jersey (the "Court") entered a
consent order (the "Order") against the then ultimate parent of the general
partner, Mutual Benefit, appointing the Commissioner of Insurance of the
State of New Jersey as rehabilitator of Mutual Benefit (the
"Rehabilitator"). The Rehabilitator was granted immediate, exclusive
possession and control of, and title to, the business and assets of Mutual
Benefit. The Rehabilitator was directed to conduct the business of Mutual
Benefit and to begin taking such steps as he might deem appropriate toward
removing the cause and conditions that made the rehabilitation necessary.
The Order was not a declaration of insolvency, and Mutual Benefit entered
into rehabilitation voluntarily to protect, among other things, the
interest of Mutual Benefit policyholders.
An extensive review of the business and affairs and the financial condition
of Mutual Benefit and its affiliates, including MBM, was conducted by the
Rehabilitator and a plan of rehabilitation was filed with the Court in
August 1992. A third amended plan (the "Plan") was filed and confirmed by
the Court in January 1994 and closed April 29, 1994, with an effective
implementation date of May 1, 1994. Mutual Benefit and certain
creditors filed separate appeals to the Plan, the outcome of which cannot
be determined at this time.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued):
Effective May 1, 1994, in accordance with the Plan, Mutual Benefit
transferred substantially all of its assets and liabilities to MBL Life
Assurance Corporation ("MBL Life"), Mutual Benefit's assignee. Also,
effective May 1, 1994, the stock of MBL Holding Corporation ("MBLH"), MBM's
second-tier parent company, was placed in a liquidating trust. The
Commissioner of Insurance of the State of New Jersey, as trustee (the
"Trustee") of such trust, will determine whether to sell, liquidate,
dissolve or otherwise dispose of the assets of MBLH and MBM. In the event
that MBM is liquidated or dissolved, the limited partners have a right to
continue the Partnership by electing a substitute general partner or the
Partnership will automatically terminate as provided in the partnership
agreement. The Trustee's specific intentions as to MBM are not known, and
the ultimate impact on the Partnership cannot be determined at this time.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand
and short-term, highly liquid investments with original maturities of three
months or less.
MORTGAGE LOAN PARTICIPATION: Mortgage loan participation is recorded at
the lower of cost or fair value of the underlying collateral. (See Note
2).
SYNDICATION COSTS: Syndication costs, principally selling commissions,
have been treated as a direct reduction of limited partners' capital.
INCOME TAXES: All items of taxable income and all income tax deductions of
the Partnership flow through to the partners individually. Accordingly, the
accompanying financial statements do not include a provision for income
taxes. At December 31, 1995, the tax basis of the Partnership's assets and
liabilities is approximately $1,047,000 greater than the Partnership's book
basis.
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT: Net income and net loss
per limited partnership unit is computed based on the number of units
outstanding of 23,076 each period.
2. MORTGAGE LOAN PARTICIPATION:
The Partnership has a mortgage-loan participation (the "Radnor Loan")
representing approximately a 21% interest in an original $11,000,000
mortgage loan. Commencing July 1, 1991, monthly payments of principal and
interest based on a 30 year amortization schedule were required over the
remaining term of the loan.
The loan is collateralized by a first mortgage on the Radnor Inn (formerly
St. Davids Inn) located in St. Davids, Pennsylvania; an interest in the
borrower's equipment, fixtures, and furnishings; and an assignment of
leases and rents with respect to the Radnor Inn.
Effective September 30, 1993, Mutual Benefit, as the principal loan
participant, modified the first-mortgage loan and entered into a second-
mortgage loan agreement with the borrower. The Partnership has
approximately a 21% interest in each of the two loans. Monthly mortgage
payments of interest only were payable at 8.5% during 1993, 9% during 1994
and 9.5% beginning January 1, 1995 through the modified maturity date of
December 31, 1999. Additional payments equal to 60% of Excess Cash Flow,
as defined in the mortgage modification agreement, are due until January
1995, at which time additional payments will be reduced to 40% of Excess
Cash Flow, provided no default has occurred. Additional payments of
$40,000 each were made to the loan servicer by the borrower in March 1996
and June and September 1995. The Partnership's share of each of the
additional payments was $8,385. On June 1996 an additional payment of
$10,555 was made to the loan servicer. The Partnership's share of the
additional payment was $2,213.
A second mortgage loan for $998,110, which represents all unpaid interest
on the first mortgage loan through December 31, 1992, accrues interest at
5% beginning July 1, 1993 and matures on December 31, 1999. Payments up to
$100,000 annually are due on the second mortgage on each anniversary date
to the extent of Excess Cash Flow, as defined, until such second mortgage
has a balance of $500,000 at which level it must be maintained. A payment
of $100,000 was made by the borrower in the fourth quarter of 1995. In
1993, the Partnership fully reserved for the second mortgage loan and as
such, any subsequent principal or interest payments received are reflected
as "Recovery of amounts previously written off" in the accompanying
Statements of Income. These payments amounted to $20,964 in 1995. The
second-mortgage loan is collateralized by an interest in the borrower's
equipment, fixtures and furnishings and an assignment of leases and rents
with respect to the Radnor Inn.
The Partnership's approximate 21% interest in the outstanding principal
balance of the first and second-mortgage loans before writedowns is
$2,226,175 and $190,623, respectively, at June 30, 1996.
At December 31, 1992, it was determined that Radnor Loan was in-substance
foreclosed. Consequently, the Partnership reclassified this net mortgage-
loan participation to insubstance foreclosed real estate. Beginning in
1993, interest income on the mortgage loan was recorded as received.
2. MORTGAGE LOAN PARTICIPATION (Continued):
During 1994, with respect to the Radnor Loan, the Partnership adopted
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114") and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosure" ("SFAS 118"). Pursuant to the
guidance provided by SFAS 114 and SFAS 118, the Partnership consequently
has reclassified the in-substance foreclosed real estate back to mortgage-
loan participation and will account for this asset as a loan.
For the Radnor mortgage-loan participation, the Partnership had an
agreement with Mutual Benefit pursuant to which Mutual Benefit, upon a
default by the borrower, agreed to repurchase the outstanding principal
balance of the loan participation plus accrued interest upon written demand
from the Partnership. The terms of the agreement provided for the
Partnership to pay Mutual Benefit an annual repurchase fee equal to .25% of
the outstanding principal balance of the Radnor participation.
In the fourth quarter of 1991 and the second quarter of 1992, Mutual
Benefit defaulted on its repurchase agreement on the Radnor Loan.
Accordingly, the Partnership is no longer accruing for the repurchase fee.
In November 1992, the Partnership filed written proofs of claims against
Mutual Benefit, in order to serve a claim in Mutual Benefit in
Rehabilitation in the amount of approximately $2,300,000, representing the
outstanding principal balance when Mutual Benefit defaulted on its
repurchase obligation for the Radnor.
In the Mutual Benefit rehabilitation proceeding, the Partnership will, on
account of its claim, retain its interest in the Radnor Loan participation
and have a deficiency claim of approximately $686,000, which is the
difference between the value of that participation as of January 28, 1993,
and the full principal amount of the loan. The Partnership has also
received a deficiency claim of approximately $936,000, which is the
difference between the full principal amount of its participation in the
Sun Valley Loan, plus accrued but unpaid interest to July 16, 1991, and
its pro rata share of the proceeds from the discounted pay-off of that
loan. Pursuant to the Plan, holders of unsecured claims (including holders
of deficiency claims) will, on or about December 31, 1999, or sooner if the
Rehabilitation period is terminated earlier, receive a pro rata share of
the capital stock of MBL Life and a pro rata share of MBL Life Excess
Surplus, if any, as defined in the Plan.
It is currently anticipated that there will be approximately $700 million
in allowed unsecured claims, and that holders thereof will receive stock
and/or cash totaling only a fraction of their claims, if anything.
Additionally, Mutual Benefit has filed an appeal of the Court mandated
provision of the Plan requiring it to distribute a pro rata share of the
capital stock of MBL Life or make payments to unsecured creditors, and, if
Mutual Benefit is successful in its appeal, the Partnership would receive
nothing on account of its deficiency claims.
3. RELATED PARTY TRANSACTIONS:
The following is a summary of the related party transactions that occurred
during the:
Six Months Ended June 30,
1996 1995
Paid or accruing to General Partner:
Support Services $ 2,725 $ 6,981
Distributions 825 1,393
Paid or accruing to affiliate:
Mortgage service fees 2,792 2,817
------- -------
$ 6,342 $11,191
------- -------
------- -------
The Partnership invests cash balances in MAP-Government Fund, Inc. ("MAP"),
a fund whose investment advisor is an affiliate of the General Partner.
MAP is a registered investment company that invests solely in short-term
obligations issued or guaranteed by the United State government, or its
agencies. The MAP balance included in cash and cash equivalent at June 30,
1996 and December 31, 1995 approximated $97,721 and $125,700 respectively.
4. BASIS OF PRESENTATION:
In the opinion of management, all adjustments considered for a fair
presentation have been included. All adjustments are of a normal recurring
nature.
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Pursuant to the vote of Limited Partners, the Partnership is actively
attempting to sell the Partnership's participation in the Radnor Loan, the
General Partner has received an offer, subject to certain contingencies, to
acquire the participation for the minimum amount approved by the Limited
Partners.
The Partnership's General Partner, MB Mortgage, Inc. ("MBM") was an
indirect wholly owned subsidiary of Mutual Benefit prior to May 1, 1994.
On July 16, 1991, the Superior Court of New Jersey (the "Court") entered a
consent order (the "Order") against the then ultimate parent of the General
Partner, Mutual Benefit, appointing the Commissioner of Insurance of the
State of New Jersey as Rehabilitator of Mutual Benefit (the "Rehabilitator").
The Rehabilitator was granted immediate, exclusive possession and control of,
and title to, the business and assets of Mutual Benefit. The Rehabilitator
was directed to conduct the business of Mutual Benefit and to begin taking
such steps as he might deem appropriate toward removing the cause and
conditions that have made the rehabilitation necessary. The Order was not
a declaration of insolvency, and Mutual Benefit entered into rehabilitation
voluntarily to protect, among other things, the interests of Mutual Benefit
policyholders. An extensive review of the business and affairs and the
financial condition of Mutual Benefit and its affiliates, including the
General Partner, was conducted by the Rehabilitator and a plan of
rehabilitation was filed with the Court in August 1992. A third amended
plan (the "Plan") was filed and confirmed by the Court in January 1994 and
closed April 29, 1994, with an effective implementation date of May 1, 1994.
Mutual Benefit and certain creditors filed separate appeals to the Plan, the
outcome of which cannot be determined at this time.
In accordance with the Plan, effective May 1, 1994, Mutual Benefit
transferred substantially all of its assets and liabilities to MBL Life,
Mutual Benefit's assignee. Also, effective May 1, 1994, the stock of MBL
Holding Corporation ("MBLH"), the General Partner's second-tier parent
company, was placed in a liquidating trust. The Commissioner of Insurance
of the State of New Jersey, as trustee (the "Trustee") of such trust, will
determine whether to sell, liquidate, dissolve or otherwise dispose of the
assets of MBLH and the General Partner. In the event that the General
Partner is liquidated or dissolved, the Limited Partners have a right to
continue the Partnership by electing a substitute general partner or the
Partnership will automatically terminate as provided in the Partnership
Agreement. The Trustee's specific intentions as to the General Partner are
not known and the ultimate impact on the Partnership cannot be determined
at this time.
Financial Condition
Early in 1992, the Radnor Loan went into default and the borrower
requested the loan be modified. In April 1992, the Partnership requested
Mutual Benefit to repurchase its participation in the Radnor Loan under a
repurchase agreement described below. Because Mutual Benefit was in
rehabilitation, as described above, it was unable to honor its obligation
to do so. At December 31, 1992, it was determined that the Radnor Loan was
in-substance foreclosed. Consequently, the Partnership reclassified the net
mortgage loan participation to in-substance foreclosed real estate. During
1994, the Partnership adopted Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114")
and No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures" ("SFAS 118"). Pursuant to the guidance provided
by SFAS 114 and SFAS 118, the Partnership consequently has reclassified the
in-substance foreclosed real estate back to mortgage loan participation and
will account for this asset as a loan.
The Radnor Loan is collateralized by a hotel doing business as the
Radnor Inn, formerly the St. Davids Inn, in St. Davids, Pennsylvania.
Based on information provided by the borrower, average occupancy for the
six months ended June 30, 1996 and 1995 was approximately 74%. The
General Partner believes that this property is in good condition and is
well located for the short-term business traveler, but this sector has
fallen off with the relocation and down-sizing of area businesses. The
local lodging market is also extremely competitive because of a new
entry from a national chain last year. The hotel's food and beverage
operation is considered to be very important to the hotel's profitability.
The hotel was added to the Best Western reservation system in the second
quarter of 1994.
As described in Note 2 to the Partnership's financial statements
included herein, the Partnership had an agreement with Mutual Benefit under
which Mutual Benefit would repurchase the Radnor participation in the event
of a default by the borrower. However, Mutual Benefit was in rehabilitation
as described above and could not honor the repurchase agreement. The
Partnership ceased payment of the repurchase fees to Mutual Benefit in
October 1991. The Partnership filed proofs of claim as an unsecured
creditor of Mutual Benefit in November 1992, in the amount of $2,300,356
for the Radnor Loan.
In the Mutual Benefit rehabilitation proceeding, the Partnership will,
on account of its claim, retain its interest in the Radnor Loan participation
and have a deficiency claim of approximately $686,000, which is the
difference between the value of that participation as of January 28, 1993,
and the full principal amount of the participation. The Partnership will
also receive a deficiency claim of approximately $936,000, which is the
difference between the full principal amount of its participation in the Sun
Valley Loan plus accrued but unpaid interest to July 16, 1991, and its pro
rata share of the proceeds from the discounted payoff of that loan. Pursuant
to Mutual Benefit's Plan, holders of unsecured claims (including holders of
deficiency claims) will, on or about December 31, 1999, or sooner if the
Rehabilitation period is terminated earlier, receive a pro rata share of the
capital stock of MBL Life and a pro rata share of MBL Life's Excess Surplus,
if any, as defined in the Plan.
It is currently anticipated that there may be approximately $700
million in allowed unsecured claims, and that holders thereof will receive
stock and/or cash totaling only a fraction of their claims, if anything.
However, Mutual Benefit has filed an appeal of the Court mandated provision
of the Plan requiring to distribute a pro-rata share of the capital stock of
MBL Life or make payments to unsecured creditors, and, if Mutual Benefit is
successful in its appeal, the Partnership would receive nothing on account
of its deficiency claim.
Results of Operations
Effective September 30, 1993, Mutual Benefit, the principal loan
participant, modified the first-mortgage loan and entered into a second
mortgage-loan agreement with the borrower of the Radnor Loan. The
Partnership has approximately a 21% interest in each loan. The modified
loan terms had an interest rate of 8% beginning September 1, 1992 through
December 31, 1992. Monthly mortgage payments of interest only were payable
at 8.5% during 1993, 9% during 1994 and 9.5% beginning January 1, 1995
through the modified maturity date of December 31, 1999. Additional
payments equal to 60% of Excess Cash Flow, as defined in the mortgage
modification agreement, were due until January 1995, at which time
additional payments were reduced to 40% of Excess Cash Flow, provided no
default has occurred. Additional payments of $40,000 each were made to
Mutual Benefit by the borrower in June and September of 1995 and March 1996.
The Partnership's share of each additional payment was $8,385. In June
1996 an additional payment of $10,555 was made to the loan servicer. The
Partnership's share of the additional payment was $2,213.
A second mortgage loan for $998,110, which represents all unpaid
interest on the first mortgage loan through December 31, 1992, accrues
interest at 5% beginning July 1, 1993 and matures on December 31, 1999.
Payments up to $100,000 annually are due on the second mortgage on each
anniversary date to the extent of excess cash flow, until such mortgage has
a balance of $500,000, at which level it must be maintained. In the fourth
quarter of 1995, the borrower made a $100,000 payment on the second
mortgage. The Partnership's share of this payment was $20,964. In 1993,
the Partnership fully reserved for the second mortgage loan and as such,
any subsequent principal or interest payments received are reflected as
"Recovery of amounts previously written off" in the accompanying Statements
of Income. The second-mortgage loan is collateralized by an interest in
the borrower's equipment, fixtures and furnishings and an assignment of
leases and rents with respect to the Radnor Inn. The Partnership has
recorded interest income of $106,114 and $106,199 for the six month period
ended June 30, 1996 and 1995, respectively, on the Radnor Loan.
The Partnership's 21% interest in the outstanding principal balance
of the first and second-mortgage loan before writedowns is $2,226,175 and
$190,623, respectively, as of March 31, 1996.
Liquidity and Capital Resources
In February 1996, the Limited Partners were requested to vote concerning
the acceptance of a discounted payoff of their interest in the Radnor
mortgage by the management of the Hotel. The Partnership's majority of the
Limited Partnership units voted in favor of pursuing the sale of their
mortgage participation interest during the second quarter of 1996. There is
no assurance that the proposed transaction will be completed due to
outstanding contingencies.
The Partnership believes it has retained adequate cash reserves to meet
Partnership obligations in 1996. Additional cash is being generated from
the mortgage-loan interest that may provide sufficient cash for small
distributions in 1996. Partnership expenses will reduce the net yield on
the mortgage loan and cash available for partner distributions in the future.
The General Partner is seeking buyers for the Radnor Loan participation.
Any sale of the mortgage loan would be an event causing termination of the
Partnership. Proceeds from a sale of the Radnor Loan would be distributed
100% to the Limited Partners to the extent not required to fund expenses to
dissolve the Partnership.
Distributions of distributable cash from operations are expected to be
made to the Partners on an annual basis. During the second quarter of 1996,
the Partnership distributed cash in the amount of $39,569 to Limited
Partners and $315 to General Partners representing the net cash generated
from operations during the first quarter of 1996.
The Partnership believes it has retained adequate cash reserves to meet
future obligations of the Partnership.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant is not subject to any material pending legal proceedings,
and no such proceedings terminated during this quarter ended June 30, 1996.
Item 2. Changes in Securities
(a) and (b) None
Item 3. Defaults Upon Senior Securities
(a) and (b) None
Item 4. Submission of Matters to a Vote of Security Holders
(a) and (c) On February 12, 1996, the Registrant's limited partners
were solicited to determine whether or not they were interested in pursuing
a possible discounted pay-off or other disposition of the Registrant's
participation in the loan secured by the Radnor Inn, provided that the
transaction and the subsequent dissolution of the Registrant would result
in a distribution totaling not less than $45 per Limited Partnership Unit.
Voting on this proposal is now completed. Of the 23,076 Limited Partnership
Units entitled to vote, 12,373.651 Units (53.621%) voted in favor of a
disposition, 2,583.80 Units (11.197%) voted against any disposition, 195.59
Units (0.847%) abstained, and 7,922.95 Units (34.33%) failed to vote. Of
the Units that failed to vote, none are held by banks or brokers.
(b) and (d) None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MUTUAL BENEFIT MORTGAGE
INVESTORS 1985
By: MB Mortgage, Inc.
General Partner
By: THOMAS G. MORGAN
Thomas G. Morgan
Vice President and Treasurer
By: THOMAS G. MORGAN
Thomas G. Morgan, Principal
Financial and Accounting Officer
Date: August 12, 1996
<TABLE> <S> <C>
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